Barney Frank's Two Top Goals: Protecting Wall St. Reform, Social Spending

Rep. Barney Frank, the long-time liberal voice (and a fast-talking, brusque one at that) who announced he won't be running for re-election, discussed with NPR's Guy Raz, co-host of All Things Considered, the items of unfinished business he plans attend to during his remaining year in Congress.

"Well, there are exactly two. One, protecting the financial reform bill from these right- wing efforts to undermine it. They are running particularly in the house, where they control it, a kind of series of guerilla attacks. I want to try to fight those.

"Secondly, the next fiscal year, 2013, we should be dealing with long-term deficit reduction. And I am determined to do everything I can to make sure that reduction of our excessive worldwide military commitments is a part of that.

"We should be getting out of Afghanistan. We should be pulling troops out of Europe and whittling down the excessive nuclear deterrent because there's no more Soviet Union.

"If we don't put the military into the mix of a balanced deficit-reduction plan than things like Social Security and Medicare and a whole range of domestic quality of life programs will take too big a hit."

The financial reform law named for Frank and former U.S. senator from Connecticut Chris Dodd, is the bane of many Wall Street executives who view it as a threat to their ability to book the largest profits and therefore make the biggest bonuses possible.

Republicans have argued that it is a case of regulatory overreach by the Obama Administration and liberal Democrats.

By contrast, some liberals and even a few non-progressives have criticized the law as not going far enough to rein in the financial derivatives that contributed to the 2008 financial meltdown.

Frank said the law is already making a difference.

"It is retarding the kind of irresponsibility. Let me give you the first thing that I know it's doing. the biggest single cause, I believe, was loans made to people who shouldn't have gotten those loans. mortgage loans made to people who were too poor to pay them back, who were being given more loan than the house was worth.

"We outlawed those loans. Secondly, you had the derivatives placed on these loans that AIG and others got into. We now say that if you're going to get into the kind of trading with banks and financial institutions that AIG had on derivatives, there's got to be capital behind it. There's got to be margin.

"So we have substantially reduced — now that isn't yet fully implemented, the mortgage things are.

"But in a few months if the CFTC keeps going you will not have the exposure that AIG had where they owed so much more money than they could possibly pay off.

"Both of those are happening. We are also imposing on banks a requirement that they keep more capital so if they do run into trouble they're less likely to fail.

Frank described as a "major legislative disappointment" his failure to "get funding for a trust fund to build rental housing for low-income people."

"I've had a two sided view here. First of all, we've been making a mistake in making loans available for home ownership for people who couldn't afford them and weren't in some cases frankly prepared to own a home.

"And instead we weren't putting enough money into rental housing. So the failure to adequately fund an ongoing rental housing situation was my major disappointment."

Like many on Capitol Hill in both parties, Frank was a strong defender of the huge mortgage giants, Fannie Mae and Freddie Mac, before their financial problems became so bad that taxpayer bailouts were needed.

Conservatives have often pointed to Frank as one of the chief enablers, saying that his support of the two government-sponsored entities was central to the housing collapse.

Frank has correctly argued that Republicans controlled Congress and the White House when the worst excesses were building up in mortgage markets generally and at Fannie and Freddie specifically.

Still, it's true that Frank was a big booster of expanding home ownership. So his housing comments on All Things Considered had the sound of a mea culpa.

Frank, who was in the vanguard of openly gay members of Congress, said he took pride in the part his coming out in 1987 played in the nation's progress in matters of sexual identity.

"It will be my 25th anniversary. I was very frightened when I did it, it turned out unnecessarily. Yeah, I think one of the great success stories in America is the extent to which we have overcome prejudice based on being lesbian or gay, bisexsual, transgender.

"It's not compeletely gone but the end is in sight. And I am proud of my role in that. I think cioming out was a big part of it because reality beats prejudice and presenting people, those of us who are gay, lesbian, bisexual, transgender with the reality of who we are, we give an alternative to the prejudice, and the prejudice loses."

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GUY RAZ, HOST:

After three decades in the U.S. House of Representatives, Massachusetts Democrat Barney Frank has decided not to seek re-election. He made the announcement yesterday. Frank is perhaps best known as among the first openly gay members of Congress, and more recently as the co-author of a sweeping financial overhaul bill known informally as Dodd-Frank. And Barney Frank joins us now from his office on Capitol Hill. Congressman, welcome.

REPRESENTATIVE BARNEY FRANK: Thank you.

RAZ: You've said that by not focusing on a re-election campaign, fundraising and all the things that go with that, you'll be able to focus on your job for the next year? What will be your top two or three priorities for your last year in office?

FRANK: Well, there are exactly two: one, protecting the financial reform bill from these right-wing efforts to undermine it. They are running, particularly in the House where they control it, a kind of series of guerilla warfare attacks. I want to try and fight those. Secondly, beginning at the end of the next fiscal year, 2013, we should be dealing with the long-term deficit reduction, and I am determined to do everything I can to make sure that reduction in our excessive worldwide military commitments is a part of that. We should be getting out of Afghanistan and we should be pulling troops out of Europe and whittling down the overly excessive nuclear deterrent because there's no more Soviet Union.

If we don't put the military into the mix of a balanced deficit reduction plan, then things like Social Security, Medicare and a whole range of domestic quality of life programs will take too big a hit.

RAZ: Let me ask you about Dodd-Frank, the financial overhaul bill that was signed into law in 2010. It will be fully operational by the end of 2012. First of all, in your view, what is it already doing to prevent the kind of financial crisis that inspired its implementation?

FRANK: Well, it is retarding the kind of irresponsibility - let me give you the first thing that I know it's doing. The biggest single cause, I believe, of the crisis was loans made to people who shouldn't have gotten those loans. Mortgage loans made to people who were too poor to pay them back and who were being given more loan than the house was worth. We outlawed those loans.

Secondly, you had the derivatives placed on these bad loans that AIG and others got into. We now say that if you're going to get into the kind of trading with other banks and financial institutions that AIG had on derivatives, there's got to be capital behind it. There's got to be margins.

So we have substantially reduced - now, that isn't yet fully implemented. The mortgage things are. But within a few months, if the CFDC keeps going, you will not have the exposure that AIG had where they will owe so much more money than they could possibly pay off. Both of those are happening.

We are also imposing on banks a requirement that they keep more capital so that if they do run into trouble, they're less likely for it to fail.

RAZ: Congressman Frank, if there was one thing you could have included in Dodd-Frank that you just couldn't put in there because it wouldn't have been, you know, accepted by most members of Congress, what would that have been?

FRANK: Well, first of all, I got to say I know this is a common journalistic thing: What's the one thing? I never think that way except when I'm talking to a journalist. With regard to the financial reform, I would have gone further in regulating derivatives and in requiring margin and capital for derivatives, but not in a qualitative way. I, frankly, believe we were pretty successful in getting most of what we wanted into the bill.

My major - let's say a disappointment was that we didn't get funding for a trust fund to build rental housing for low income people. I have had a two-sided view here. First of all, that we have been making a mistake in making loans available for home ownership for people who couldn't afford them and weren't, in some cases, frankly prepared to own a home. And instead, we weren't putting enough money into rental housing.

So the failure adequately to fund an ongoing rental housing situation was my major disappointment.

RAZ: I want to ask you about a decision you made in 1987. You went public to tell people that you are gay. That was controversial at the time. Are you heartened at the distance America has come?

FRANK: Oh, without question. Without question. It'll be my 25th anniversary and I was very frightened when I did it, it turned out unnecessarily. Yeah. I think one of the great success stories in America is the extent to which we have overcome prejudice based on being lesbian, gay, bisexual, transgender. It's not completely gone, but the end is in sight and I am proud of my role in that. I think, frankly, coming out was a big part of it because reality beats prejudice and by presenting people - those of us who are gay, lesbian, bisexual or transgender - with the reality of who we are, we give an alternative to the prejudice and the prejudice loses.

RAZ: Barney Frank, thank you.

FRANK: You're welcome.

RAZ: That's Congressman Barney Frank. He's a Massachusetts Democrat. He's announced he will not seek re-election next year, ending a career of more than three decades in Congress. Transcript provided by NPR, Copyright NPR.